Gold prices remained relatively stable on Wednesday, maintaining recent gains as fears of a looming recession in the Eurozone, driven by a series of lackluster economic indicators, continued to bolster demand for safe-haven assets.
Despite the persisting concerns over higher U.S. interest rates, particularly following data released on Tuesday indicating an improvement in local business activity in October, significant advances in gold prices were somewhat constrained. The U.S. dollar strengthened in overnight trading, while Treasury yields stabilized after recent losses.
This week saw a reduction in safe-haven demand for gold as signs of de-escalation emerged in the Israel-Hamas conflict, notably when Israel postponed a planned ground assault on Gaza. Nevertheless, these improvements were somewhat offset by the release of weak Purchasing Managers’ Index (PMI) data from the Eurozone, heightening concerns of a potential economic downturn in the region. It’s worth noting that Germany, Europe’s largest economy, had entered a recession earlier this year.
Gold remained within sight of the $2,000 per ounce mark, but its near-term trajectory remained uncertain, especially given several key U.S. economic indicators slated for release this week.
As of 01:10 ET (05:10 GMT), spot gold showed a 0.1% increase, reaching $1,972.51 per ounce, while gold futures expiring in December experienced a 0.2% decline, settling at $1,983.15 per ounce.
Upcoming Economic Indicators and Their Impact on Gold
Markets are eagerly awaiting further economic cues from the United States this week, with the third-quarter Gross Domestic Product (GDP) data expected on Thursday. Positive signals regarding the resilience of the U.S. economy could provide the Federal Reserve with more room to maintain higher interest rates for a longer duration, potentially diminishing the appeal of gold as a safe-haven asset.
Following the GDP reading, the release of the Personal Consumption Expenditures (PCE) inflation data is expected on Friday. Recent months have seen an increase in U.S. inflation, providing the Fed with greater motivation to maintain a hawkish stance.
The central bank is scheduled to meet next week to make decisions on interest rates. Although the market widely anticipates that the Fed will maintain its current rates, Fed officials have signaled the possibility of at least one more hike this year, suggesting that rates will remain elevated until at least the end of 2024. Higher interest rates tend to reduce the attractiveness of assets like gold, which do not provide yields.
Copper Prices React to China’s Infrastructure Spending Plans
Turning to industrial metals, copper prices experienced a slight decline on Wednesday, with limited support from the announcement that China, a major importer, intends to increase infrastructure spending this year.
Copper futures dipped by 0.2% to $3.6247 per pound. The Chinese government’s decision to issue 1 trillion yuan ($1 = 7.3 yuan) in bonds is primarily aimed at boosting infrastructure spending, particularly in disaster repair and relief efforts, with the added goal of stimulating the Chinese economy.
Despite this announcement, copper saw minimal change, as concerns about a potential recession in the Eurozone also pointed to weaker industrial demand in the region in the months ahead.
